Ramsay Eyes Growth as Healthscope Falters

Ramsay Health Care is exploring growth opportunities as Healthscope’s financial troubles force the closure of unviable facilities, but competition regulators may block direct acquisitions of top-performing assets. Ramsay’s share price is up over 8% in a month, hinting at market optimism about its potential gain from its weakened rival’s downturn.

Healthscope, Australia’s second-largest private hospital operator, is facing a significant shake-up. Following the opening of a data room for potential buyers, assessments show that only a handful, around 6 of its 37 facilities, are profitable. As a result, many hospitals may be shut down or sold off. Proximity is working in Ramsay’s favour, with several Healthscope facilities located within a 20-minute drive of Ramsay hospitals, offering a chance to capture both patients and doctors displaced by closures.

The details reveal a complex environment. The Australian Competition and Consumer Commission (ACCC) is likely to resist Ramsay taking over the best-performing Healthscope sites directly. However, Ramsay could bypass this issue by restructuring its portfolio by selling off lower-performing hospitals and snapping up stronger assets like Healthscope’s Knox Private Hospital in Melbourne. Brookfield, which purchased Healthscope in 2019 for $4.4 billion, has reportedly handed control to creditors, who are now selling debt at steep discounts, some at less than 50 cents on the dollar.

Looking ahead, Ramsay’s gains aren’t guaranteed. Any acquisition strategy could be held up by regulators or fail to deliver the expected patient volume. Meanwhile, Healthscope's decline is rooted in deeper systemic issues, from unsustainable debt levels to rising staff salary demands. A separate challenge for Ramsay involves its European arm, Ramsay Sante, where limited state health funding has made operations less profitable despite renegotiations and internal reviews.

Source: The Australian, Healthcare Business, Market Screener